Income Tax Appellate Tribunal - Mumbai
Acit Cen Cir 40, Mumbai vs Natvar Parikh Industries Ltd, Mumbai on 21 April, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI
BEFORE SRI MAHAVIR SINGH, JM AND SRI ASHWANI TANEJA, AM
IT(SS)A. 08/Mum/2014
(Block Period: 01-04-1990 to 07-11-2000)
Asst. Commissioner of Income Tax, Natvar Parikh Industries Ltd
Central Circle 40 Natvar Parikh House, 107/109
R. No.653 6 t h Floor, Aayakar Vs. P.D. Mello RD
Bhavan M.K. Road Mumbai-400 001
Mumbai-20
Appellant .. Respondent
PAN No. AAACN5361L
Revenue by .. Shri Suman Kumar, DR
Assessee by .. Shri Hariom Tulsyan , AR
Date of hearing .. 24-03-2017
Date of pronouncement .. 21-04-2017
ORDER
PER MAHAVIR SINGH, JM:
This appeal by the Revenue is arising out of the order of CIT (A)-38, Mumbai in appeal No. CIT (A)-38/IT-741A/2013-14 dated 31-07-2014. The Block Assessment was framed by DCIT Centre Circle 40, Mumbai for the assessment years pertaining to previous ye ars 01-04-1990 to 31-03- 2000 and broken period of previous year 01 -04-2000 to 07-11-2000 vide order dated 29-11-2002 u/s 158BC/143(3) of the Income Tax Act, 1961 (hereinafter 'the Act')
2. The only issue in this appeal of assesses is against the order of CIT(A) confirming the levy of penalty under section 158BFA (3)(b) of the Act. For this assessee has raised the technical issue of retrospectivity amendment to section 158B (b) with effect from 01-07-1995 whereby the "undisclosed income"
includes" ............. or any expense, deduction or allowance claimed under this Act which is found to be false. For this Revenue has raised following ground No.1: -
"1. On the facts and in the circumstances of the case and in the law, the Ld. CIT(A) erred in deleting the IT(SS)A. 08/Mum/2014 Natvar Parikh Industries Ltd;
Block Period: 01-04-1990 to 07-11-2000 penalty levied u/s.158BFA(3)(b) of the Act, amounting to Rs.69.05,262/--, without appreciating the fact that there was a retrospective amendment to section 158B (b) w.e.f. 01.07.1995, whereby the "undisclosed income" includes".
........... or any expenses, deduction or allowance claimed under this Act which is found to be false.
2. On the facts and in the circumstances of the case and in the law, the Ld. CIT(A) erred in deleting the penalty levied u/s.158BFA(3)(b) of the Act, amounting to Rs.69,05,262/ without appreciating the fact that the quantum additions were upheld by the Hon'ble Tribunal as the said disallowances were held to be unlawful expenses and falls outside the ambit of provisions of section 37(l) of the I.T. Act.
3. On the facts and in the circumstances of the case and in the law, the Ld. CIT(A) erred in deleting the penalty levied u/s.158BFA(3)(b) of the Act, amounting to Rs.69,05,2621- by relying on the decision of the Mumbai High Court in the case of CIT v/s. Yahoo India Pvt. Ltd. (203) 216 Taxman 66 (Mag.)/33 Taxman corn. 332 (Born), wherein the facts of the case are distinguishable to the facts of the assessee's case in the instant appeal in as much as the Tribunal had deleted the quantum addition made by the AO and the corresponding penalty also got deleted.
4. On the facts and in the circumstances of the case in the law, the Ld. CIT(A) erred in deleting the penalty levied under section 158BFA (3)(b) of the Act, amounting to Rs.69,05,262/-, by holding that the issue (penalty alone) is a debatable issue as the amendment to section 158B (b) of the Income Tax Act is made with retrospective effects.
Page 2 of 13IT(SS)A. 08/Mum/2014 Natvar Parikh Industries Ltd;
Block Period: 01-04-1990 to 07-11-2000 The appellant prays that the order of CIT(A) on the above ground be set aside and that of the Assessing Officer be restored.
The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary. "
3. Briefly stated facts are that a search and seizure operation under section 132 of the Act was conducted on the business premises of the assessee group of cases and residential premises also on 07-11-2000. The assessee in response to notice under section 158BC of the Act filed its block return of income on 30-05- 2001. The assessee for the AY 2001-02 disclosed an amount of Rs. 58,68,098/- and another amount to Rs.75,31,902/-. Thereby, the assessee declared undisclosed income to the tune of Rs. 1.34 Crs. The assessee has disclosed the undisclosed income of Rs.75,31,902/- on lump sum basis. The block assessment was completed on 29-11-2002 determining the total undisclosed income on the basis of seized material at Rs.1,81,97,680/- During the course of block assessment proceedings the AO made addition on account of commission paid and expenses incurred by one Shri YS Tomar for obtaining different agro project for the assessee to the tune of Rs. 24,9,577 and also commission paid to uncle K to the tune of Rs. 23,52,800/-. Finally, the matter went up to Tribunal and the Tribunal determine the total undisclosed income at Rs.1,55,5,000/- being the undisclosed income of the assessee. The Tribunal has confirmed these two additions which reads as under: -
AY Issue Amount Result
1999-00 Expenses disallowed being 27,09,577 Revenue appeal allowed
commission paid and by Hon'ble ITAT
expenses one of agent Mr.
Tomar
1999-2000 Being secret commission 23,52,800 Revenue appeal allowed
paid to 'Uncle K' by Hon'ble ITAT
Page 3 of 13
IT(SS)A. 08/Mum/2014
Natvar Parikh Industries Ltd;
Block Period: 01-04-1990 to 07-11-2000
4. It was claimed that these are disallowance of expenses and disallowance of expenses cannot be treated as undisclosed income. However, assessee has accepted the addition but whether this addition can be made the basis for levy of penalty under section 158 BFA (3)(b) of the Act. We find that the CIT(A) deleted the penalty by holding that the penalty u/s 158 BFA (2) of the Act cannot be levied in view of the retrospective ammendment made to the provisions of section 158B(b) of the Act, whereby CIT(A) held as under: -
7.1 7.1 The appellant contests that the penalty u/s 1 58BFA(2) of the Act cannot be levied in view of the retrospective amendment made to the provisions of section 158B (b) of the Act and relied upon the decision of the ITAT Mumbai in the case of Super Metal Industries 119 ITD 153 as against which the A.O relied upon the decisions of Gujarat High Court in the case of Kandoli Bhogilal Mulchand 341 hR 271 and Becharbhai P Parmar 341 ITR 499. The issue to be decided is whether the penalty can be levied in view of the retrospective amendment made in the law. The matter is covered by the decision of the Mumbai High court in the case of CIT v.
Yahoo India (P.) Ltd. [2013] 216 Taxman 66 (Mag.)/33 taxmann.com 332 (Bom.) which is reproduced as under:
2. Penalty under section 271(1)(c) of the Income-
tax Act, 1961 (the Act) was levied upon the assessee on the ground that in the regular assessment, the deduction of the amount paid by the assessee to yahoo Holdings (Hong Kong) Ltd. without deducting tax at source has been disallowed by invoking the provisions of section 40(a) of the Act. The CIT(A) upheld the penalty imposed by the assessing officer.
3. The Tribunal deleted the penalty on the ground that in quantum appeal, the disallowance made by the Assessing Page 4 of 13 IT(SS)A. 08/Mum/2014 Natvar Parikh Industries Ltd;
Block Period: 01-04-1990 to 07-11-2000 Officer has been deleted by the Tribunal. Challenging the order of the Tribunal in deleting the disallowance, the revenue has filed appeal before this Court, wherein the revenue has sought to justify the disallowances by placing reliance on Explanation 5 introduced to section 9 of the Act by the Finance Act, 2012 with retrospective effect from 1st June, 1976. The very fact that the law has been amended with retrospective effect clearly shows that the issue was debatable and in the absence of any failure to disclose material facts necessary for the purpose of assessment, the deletion of penalty levied under section 271(1)(c) of the Act cannot be faulted.
7.2 Further in the case of Jindal Equipment Leasing & Consultancy Services Ltd. [(2011) 11 taxman.com 309 (Delhi)], the ITAT, Delhi dealt with the introduction of section 14A by the Finance Act, 2001 with retrospective effect from 01.04.1962. The taxpayer's case was of AY 1999-2000 i.e. before introduction of the set of new provisions. Accordingly, the Delhi Tribunal held that on the date of filing of return, no fault could be attributed on a taxpayer for not disallowing any part of expenditure u/s 14/k of the Act. Therefore, even if disallowance had been confirmed in appeal that does not conclude the concealment of income or furnishing inaccurate particulars of income. According, no penalty u/s 271(1)(c) of the Act could be levied, since the question of disallowance was contentious.
7.3 The issue of penalty arising on account of retrospective amendment of the law has not been dealt in the cases cited by the A.O namely Kandoli Bhogilal Mulchand 341 lIP 271 and Becharbhai P Parmar 341 ITR 499. In view of the above and also in view of the Page 5 of 13 IT(SS)A. 08/Mum/2014 Natvar Parikh Industries Ltd;
Block Period: 01-04-1990 to 07-11-2000 decision of jurisdictional High Court in the case of Yahoo India (P) Ltd. cited Supra holding that the retrospective amendment itself shows that the issue was debatable, the penalty levied is hereby deleted. Since the penalty levied has been deleted, the grounds regarding the correct quantum of penalty to be levied and the stake of computing the quantum of penalty at 200% though it was intended to be levied at 150%, does not arise and accordingly treated as infructuous."
5. We find that this issue is squarely covered in favour of the assessee and against the Revenue by co-ordinate Bench decision in the case of M/s Urmila & CO. Ltd. vs. ACIT in IT (SS) A No.01/Mum/2015 for AY Block Period of P.Y. 1989-90 to 1998-90And broken period of 01.04.1999 to 02.12.1999 dated 17-02- 2017, wherein it is held as under: -
"7. On legal aspect the learned Counsel for the assessee argued that the provisions of section 158B(b) of the Act which was amended by the Finance Act, 2002 with retrospective effect from 01-07-1995 by inserting the last phrase "or in expense, deduction or allowance claimed under this Act which is found to be false". The relevant provision after amendment reads as under: -
"Undisclosed income' includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purpose of this Act, or any Page 6 of 13 IT(SS)A. 08/Mum/2014 Natvar Parikh Industries Ltd;
Block Period: 01-04-1990 to 07-11-2000 expense, deduction or allowance claimed under this Act which is found to be false"
8. The learned Counsel for the assessee stated that no doubt this provision is inserted by the Finance Act 2002 with retrospective effect from 01-07-1995 u/s 158B(b) of the Act and block return in response to notice u/s 158BC of the Act was filed on 07-06-2000 for the relevant block period. According to us, it is therefore clear that when the block return was filed on 07-06-2000, the definition of undisclosed income did not include in item pertaining to expenses, deduction or allowance which is found to be false. He explained that use of all the terms in the highlighted expression is very important as inserted by Finance Act 2002 although with retrospective effect from 01-07-1995. The amount in accommodation bills is covered by the term deduction and the amount of money paid for procuring accommodation bill is an expense. According to the learned Counsel, this item got included in the definition of undisclosed income only by the Finance Act 2002 although amendment was made with retrospective effect from 1st July 1995 but on the day assessee filed its return of income as on 07-06-2000, the amended provision inserting these terms for making disallowance i.e. "or any expense, deduction or allowance claimed under this Act which is found to be false" did not exist. According to the learned Counsel, this amended provision could not apply to this case.
9. On legal aspect, after hearing the parties we have gone through the decision of the Hon'ble Bombay High Court in the case of CIT vs. Essar Teleholding Ltd. in Tax Appeal No. 438/2012 judgment dated 07-08-2014, after considering the decision of the Hon'ble Supreme Court in Page 7 of 13 IT(SS)A. 08/Mum/2014 Natvar Parikh Industries Ltd;
Block Period: 01-04-1990 to 07-11-2000 the case of Star India (P.) Ltd. v. CCE[2006] 280 ITR 321 has interpreted the retrospectivity as under:-
".......18. In the case of Star India (P.) Ltd. v. CCE[2006] 280 ITR 321 the Hon'ble Supreme Court held that the service of "broadcasting" was made a taxable service with effect from July 16, 2001, by the Finance Act, 2001. The appellant disputed its liability to make any payment for service tax on the ground that it did not broadcast. The Commissioner, however, held against the appellant. The matter was carried before the Commissioner of Income Tax (Appeals) and during pendency of appeal the Finance Act, 2001 was amended by the Finance Act, 2002. The effect of amendment, inter alia, was to make an agent, such as the appellant, before the Supreme Court, liable to pay service tax as broadcaster.
19. The Supreme Court noted that the Appellants' appeal pending before the Commissioner was rejected by him on the basis of this amendment. The tribunal also maintained this order and that part of the order passed by the Commissioner was not challenged in appeal. However, the appellant was aggrieved by the fact that the tribunal held it liable to pay interest on the amount which it was required to pay by reason of the 2002 amendment. The assessee contended that once the amendment was brought in, pending the appeal, there was no question of applying section 234B or any analogus provision and payment of interest. It is in that regard that the Hon'ble Supreme Court held as under :Page 8 of 13
IT(SS)A. 08/Mum/2014 Natvar Parikh Industries Ltd;
Block Period: 01-04-1990 to 07-11-2000 "7. In any event, it is clear from the language of the validation clause, as quoted by us earlier, that the liability was extended not by way of clarification but by way of amendment to the Finance Act with retrospective effect. It is well established that while it is permissible for the Legislature to retrospectively legislate, such, retrospectivity is normally not permissible to create an offence retrospectively. There were clearly judgments, decrees or orders of courts and Tribunals or other authorities, which required to be neutralised by the validation clause. We can only assume that the judgments, decree or orders, etc., had, in fact, held that persons situate like the appellants were not liable as service providers. This is also clear from the Explanation to the valuation section which says that no act or acts on the part of any person shall be punishable as an offence which would not have been so punishable if the section had not come into force.
8. The liability to pay interest would only arise on default and is really in the nature of a quasi-punishment. Such liability although created retrospectively could not entail the punishment of payment of interest with retrospective effect."
20. The Supreme Court held that the liability to pay interest would only arise on default and is Page 9 of 13 IT(SS)A. 08/Mum/2014 Natvar Parikh Industries Ltd;
Block Period: 01-04-1990 to 07-11-2000 really in the nature of a quasi punishment. The liability to tax although credited retrospectively could not entail the punishment of payment of interest with retrospective effect. It is this principle which has been laid down which is followed by the Calcutta High Court. It is that principle relied upon by the Calcutta High Court which has been applied by the Tribunal to the facts and circumstances of the present case. We do not think that the assessee before us can be called upon to pay interest in terms of section 234B, once the explanation was introduced or brought in with retrospective effect but by Finance Act, 2008. Then, there was no liability to pay interest in terms of this provision. That was because the assessee cannot be termed as defaulter in payment of advance tax. The advance tax computation on the basis of the unamended (sic) provision therefore could not have been entertained."
10. Similarly, even Hon'ble Calcutta High Court in the case of Emami Ltd. vs. CIT (2011) 337 ITR 470(Cal), has taken similar view wherein it is held that the last date of the relevant financial year was 31-03-2001, and on that day, admittedly, the assessee had no liability to pay any amount of advance tax in accordance with the law then prevailing. The amended provisions of section 115JB having come into force with effect from 01-04- 2001, the assessee could not be held a default with respect to payment of advance tax. On the last date of the financial year proceeding the relevant assessment year, as the book profits of the assessee in accordance with the then provision of law were nil, there was no advance tax Page 10 of 13 IT(SS)A. 08/Mum/2014 Natvar Parikh Industries Ltd;
Block Period: 01-04-1990 to 07-11-2000 payable within the last day of the financial year preceding the relevant Assessment Year as provided in sections 207 and 208 or within the dates indicated in section 211. Interest could not be levied under sections 234B and 234C.
11. In the present case also in sub-section 158B(b) of the Act, the last phrase inserted by the Finance Act 2002 with retrospective effect from 01-07-1995, "or any expense, deduction or allowance claimed under this Act which is found to be false", whereas the block return was filed by the assessee only on 07-06-2000 when the definition of undisclosed income did not include any item pertaining to expense, deduction or allowance which is found to be false. These items got included in the undisclosed income only by the Finance Act 2002 though retrospective from 01-07-1995, but on the day the assessee filed its return of income the amended provision did not exist. According to us the amended provision will not apply to the present case.
12. In the similar circumstances Mumbai Tribunal in the case of (TM) M/s Super Metal Industries vs. DCIT (2009) 317 ITR (AT) 161 (Mum), which is on the point of penalty under section 158BFA(2) of the Act, has considered the amendment and the relevant portion of the order reads as under:-
"Sec. 158B(b), which defines undisclosed income", was subjected to change by insertion of the words "or any expense, deduction or allowance claimed under this Act which is found to be false" with retrospective effect from 1st July,1995 by the Finance Act, 2002, after the wordings "for the purpose of this Act". The Page 11 of 13 IT(SS)A. 08/Mum/2014 Natvar Parikh Industries Ltd;
Block Period: 01-04-1990 to 07-11-2000 learned JM rightly noted that "the words underlined (italicised in print) by us were included y Finance Act 2002 which shows that at the time when the return was filed, the disallowance of expenses was not within the ambit of the expression undisclosed income:. So at the time of filing the return, assessee was not obliged to declare the same in its return particularly when no material or evidence was found relating to such expenses in the course of search carried out at the business premises of the group concerns."
Similarly, in the present case before us also at the time of filing of block return by the assessee, the assessee was not obliged to declare the expenses in the return particularly when no material or evidences was found relating to these expenses (except the statement of the CEO which was retracted) in the course of search on the business premises of the assessee. This decision of Mumbai Tribunal was affirmed by the Hon'ble Bombay High Court in income tax appeal no. 478 of 2014 in the case of CIT vs. Smt. Karajgi Vanita Nagesh dated 25-10- 2016. In the given facts and circumstances of the present case and the judicial precedence cited (supra), we reverse the orders of the lower authorities and the penalty levied under section 158BFA(2) of the Act on this jurisdictional issue."
6. Form the above, it is clear that the assessee was searched on 07-11-2000 u/s 132 of the Act and assessee filed its return of income on 30-05-2001 in response to section 158BC of the Act. It means that the ammendment brought by Finance Act 2002 w.e.f. 01-07-1995, retrospectively, but in the present case this ammendment will not apply. As a view taken in the above cited case law of the co-ordinate Bench of M/s Urmila & CO. Ltd. (supra). Respectfully following the Page 12 of 13 IT(SS)A. 08/Mum/2014 Natvar Parikh Industries Ltd;
Block Period: 01-04-1990 to 07-11-2000 same, we confirm the order of CIT(A) deleting the penalty. The appeal of Revenue is dismissed.
7. In the result, the appeal of Revenue is dismissed.
Order pronounced in the open court on 21-04-2017.
Sd/- Sd/-
(ASHWANI TANEJA) (MAHAVIR SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated:21-04-2017
Sudip Sarkar /Sr.PS
Copy of the Order forwarded to:
1. The Appellant
2. The Respondent.
3. The CIT (A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
BY ORDER,
//True Copy// Assistant Registrar
ITAT, MUMBAI
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